Daybreak Weekend: New Inflation Data, Party Conferences, Elections in Japan

This is Bloomberg day Break Weekend, our global look at 0:00:04.400 --> 0:00:06.480 the top stories in the coming week from our day 0:00:06.480 --> 0:00:08.920 Break anchors all around the world, and straight ahead on 0:00:08.960 --> 0:00:11.760 the program. After the Fed's big rate cut, we look 0:00:11.760 --> 0:00:14.560 ahead to a fresh reading on the Central banks preferred 0:00:14.760 --> 0:00:18.760 measure of inflation PCE plus. Could the uneven housing market 0:00:18.800 --> 0:00:22.040 see a boost with lower lending rates. I'm Tom Busby 0:00:22.120 --> 0:00:22.640 in New York. 0:00:22.720 --> 0:00:24.840 I'm callin heatgre in London, where we're looking ahead to 0:00:24.840 --> 0:00:28.440 one of the most pivotal periods on the UK's political calendar. 0:00:28.600 --> 0:00:31.400 I'm Brian Curtis in Hong Kong. A wide open race 0:00:31.480 --> 0:00:34.960 in the upcoming LDP election in Japan narrows. 0:00:35.479 --> 0:00:39.440 That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg 0:00:39.479 --> 0:00:42.960 eleve on three OW, New York, BLOOMBERGEN ninety nine to one, Washington, 0:00:43.080 --> 0:00:47.280 d C, Bloombergen ninety two to nine, Boston, Bloomberg nine sixty, 0:00:47.360 --> 0:00:52.320 San Francisco, DAB Digital Radio, London, Syris XM one twenty one, 0:00:52.360 --> 0:00:55.120 and around the world on Bloomberg Radio dot com and 0:00:55.200 --> 0:00:56.720 via the Bloomberg Business App. 0:01:00.240 --> 0:01:03.120 I'm Tom Busby. We begin today's program with the Federal 0:01:03.120 --> 0:01:06.800 reserve and inflation. Now, the FED cutting its benchmark lending 0:01:06.840 --> 0:01:10.560 rate by fifty basis points this past Wednesday and hinting 0:01:10.600 --> 0:01:13.720 it's not done yet, lowering rates two more FOMC meetings 0:01:13.800 --> 0:01:16.240 this year. So what does the FED see in its 0:01:16.280 --> 0:01:19.559 dot plot and is inflation really in check? For more 0:01:19.959 --> 0:01:23.759 we turned out a Bloomberg economist, Stuart Paul, So start, 0:01:23.880 --> 0:01:27.600 after that aggressive rate cut fifty basis points, what is 0:01:27.600 --> 0:01:28.720 the FED thinking now? 0:01:29.319 --> 0:01:32.040 The Fed was thinking that it was a bit behind 0:01:32.120 --> 0:01:34.320 the curve and it was necessary to do a catch 0:01:34.360 --> 0:01:37.200 up rate cut. The FED had been focusing on inflation 0:01:37.640 --> 0:01:40.959 almost exclusively for a couple of years now, but the 0:01:40.959 --> 0:01:43.720 balance of risks is now improved now. That's to say 0:01:43.760 --> 0:01:46.480 that the risk of a surge in inflation in the 0:01:46.520 --> 0:01:49.720 near term is pretty muted, but risk of deterioration in 0:01:49.760 --> 0:01:53.040 the labor market is more at the forefront now, So 0:01:53.080 --> 0:01:55.680 it is more important to do that catch up cut, 0:01:56.040 --> 0:01:58.360 get the fifty basis points out of the way. But 0:01:58.560 --> 0:02:01.520 looking ahead, it's like going to go at a slower cadence. 0:02:01.760 --> 0:02:04.960 We're likely to see just two more modest twenty five 0:02:05.000 --> 0:02:08.200 basis point cuts this year, in November and December, early 0:02:08.240 --> 0:02:09.680 November and December. 0:02:09.880 --> 0:02:12.560 And we're likely to see just four. 0:02:13.040 --> 0:02:15.960 Twenty five basis point cuts next year, probably at a 0:02:16.000 --> 0:02:16.919 quarterly cadence. 0:02:17.680 --> 0:02:21.800 And does all this mean a soft landing. 0:02:22.880 --> 0:02:26.200 Well, it depends exactly what you mean by a soft landing, right, Oh, 0:02:26.200 --> 0:02:30.160 you tell me so. If we're expecting inflation to quickly 0:02:30.200 --> 0:02:33.120 get back to the two percent target target without any 0:02:33.200 --> 0:02:37.120 sort of a deterioration the labor market from here, not likely. 0:02:37.280 --> 0:02:40.920 If we're expecting sort of that long last mile, but 0:02:41.560 --> 0:02:45.360 nothing crazy in either the growth or labor market landscape, 0:02:45.600 --> 0:02:48.639 but a tolerable but slow move back to the two 0:02:48.639 --> 0:02:52.000 percent target. I think that's entirely possible. The things that 0:02:52.120 --> 0:02:55.399 keep in mind, though, is that the labor market has 0:02:55.480 --> 0:02:58.200 been cooling, so there is that upside risk to the 0:02:58.280 --> 0:03:01.920 unemployment rate, and things just haven't been as good in 0:03:02.000 --> 0:03:04.360 the labor market as some of the headline figures have 0:03:04.440 --> 0:03:07.160 been suggesting for well over a year. The pace of 0:03:07.240 --> 0:03:10.280 payrolls has not actually been as strong as the headline 0:03:10.280 --> 0:03:13.360 figures have been saying each month, and they will be 0:03:13.480 --> 0:03:16.960 revised down in due time. So it's more like a 0:03:17.000 --> 0:03:21.960 soft ish landing, but we're not as likely to enter 0:03:22.040 --> 0:03:25.200 a recession, That recession risk isn't nearly as potent as 0:03:25.240 --> 0:03:25.800 it once was. 0:03:25.919 --> 0:03:28.280 I mean, we're still adding jobs every month, just not 0:03:28.360 --> 0:03:30.560 as many as we've seen in past months. 0:03:30.600 --> 0:03:33.600 Correct, we're adding We're still adding jobs, we're adding them 0:03:33.600 --> 0:03:36.800 at a slower pace, and we're probably not adding them 0:03:36.920 --> 0:03:39.680 at a pace that's fast enough to keep the unemployment 0:03:39.800 --> 0:03:40.960 rate totally steady. 0:03:41.480 --> 0:03:44.880 But you've seen this focus now for the FED away 0:03:44.960 --> 0:03:48.640 from inflation more toward the labor market. I mean, does 0:03:48.680 --> 0:03:50.720 that tell you that they feel we are on the 0:03:50.800 --> 0:03:54.080 right path for inflation, that it is in check in 0:03:54.080 --> 0:03:56.080 a way. It's not at the two percent target, but 0:03:56.120 --> 0:03:59.000 it's certainly heading that way. But the real threat rent now, 0:03:59.080 --> 0:04:01.160 the real risk maybe the labor market. 0:04:01.400 --> 0:04:04.040 That's right, So the real risk is the labor market. 0:04:04.040 --> 0:04:06.680 Inflation has been in check. Most of the things that 0:04:06.720 --> 0:04:11.040 have been supporting or undergirding inflation at this point are 0:04:11.080 --> 0:04:14.720 things like shelter, so a critical a critical necessity for 0:04:14.800 --> 0:04:18.920 consumers and something that's pretty sticky. Prices are pretty sticky 0:04:18.960 --> 0:04:22.279 for shelter and some items services in particular that have 0:04:22.360 --> 0:04:25.400 catch up inflation, things like auto insurance and homeowners insurance. 0:04:25.400 --> 0:04:27.440 When the price of your car and the price of 0:04:27.480 --> 0:04:29.920 your home go up, and the replacement cost of those 0:04:29.920 --> 0:04:32.760 things go up, so too will the insurance premiums for 0:04:32.920 --> 0:04:36.120 those items, and so we have that stickier inflation. Now, 0:04:36.160 --> 0:04:39.080 that's why we're likely to see core inflation of zero 0:04:39.120 --> 0:04:41.680 point two percent just to touch under zero point two 0:04:41.720 --> 0:04:43.760 percent for the month of August. When we look at 0:04:43.800 --> 0:04:46.880 the core PCE Price Index that's the FEDS preferred measure. 0:04:47.640 --> 0:04:49.800 But again, because of some of those sticky items in 0:04:49.839 --> 0:04:53.000 the core and because of unfavorable base effects over the 0:04:53.040 --> 0:04:56.120 last year, we'll probably see an uptick in the annual 0:04:56.200 --> 0:04:59.039 measure of core inflation when we get the August reading, 0:04:59.279 --> 0:05:01.800 an uptick ti about two point seven percent from two 0:05:01.880 --> 0:05:05.480 point six But again because of those sticky items, because 0:05:05.480 --> 0:05:08.279 of the unfavorable base effects, the FED will probably fade 0:05:08.279 --> 0:05:08.760 that reading. 0:05:09.400 --> 0:05:12.400 So we've seen housing and you talked about insurance, but 0:05:12.920 --> 0:05:16.440 energy prices at the gas pump, we've seen, you know, 0:05:17.200 --> 0:05:19.680 a real dip just even in the past month, the 0:05:19.680 --> 0:05:22.440 steady decline, but a real dip. Also volatile prices for 0:05:22.520 --> 0:05:25.279 food they have stabilized, they haven't gotten any worse. So 0:05:26.040 --> 0:05:29.560 could that mean, you know, could that show up in 0:05:29.640 --> 0:05:32.440 the headline reading a lot better than expected, or you're 0:05:32.480 --> 0:05:36.200 still saying all these other factors housing rents, you know, 0:05:36.600 --> 0:05:38.400 are really going to keep things in check. 0:05:38.800 --> 0:05:40.359 That's a good point. I think that you're right. I 0:05:40.360 --> 0:05:42.359 think that the headline is going to be quite a 0:05:42.360 --> 0:05:45.200 bit better. I think that on our best estimate is 0:05:45.240 --> 0:05:49.680 that monthly headline pce inflation. So adding back in food 0:05:49.720 --> 0:05:53.600 and energy, we expect the monthly headline inflation reading to 0:05:53.640 --> 0:05:56.720 register to zero point one percent, so a bit slower 0:05:56.839 --> 0:05:59.240 inflation for the headline than for the core. And we 0:05:59.279 --> 0:06:02.200 also expect the annual measure to improve to about two 0:06:02.240 --> 0:06:04.839 point two percent from two point five percent previously, So 0:06:05.520 --> 0:06:07.719 headline's going to be a little bit better. Something to 0:06:07.800 --> 0:06:10.960 keep in mind, though, is that the decline in gasoline prices, 0:06:10.960 --> 0:06:13.640 which has been good for folks when they drive around 0:06:13.680 --> 0:06:16.720 and see prices at the pump, it might actually support 0:06:16.800 --> 0:06:20.760 sentiment a little bit. That's downstream of declining global energy prices, 0:06:21.120 --> 0:06:24.920 and that's a consequence of expectations for slower global growth. 0:06:25.279 --> 0:06:27.760 So again it just speaks to the FED being at 0:06:27.760 --> 0:06:30.560 the at the right point in the rate cutting cycle, 0:06:30.560 --> 0:06:33.400 getting started with that jumbo cut to try to support 0:06:33.400 --> 0:06:34.680 global growth going forward. 0:06:35.400 --> 0:06:38.640 Now, also out this week, August personal income and personal 0:06:38.760 --> 0:06:41.880 spending data. Are people still spending? That is the question. 0:06:42.279 --> 0:06:44.039 Are we going to see that in the personal incomes 0:06:44.080 --> 0:06:44.719 and spending? 0:06:44.880 --> 0:06:47.159 People are still spending, but they're quite a bit more 0:06:47.240 --> 0:06:49.960 selective in what they're spending on. So we're still going 0:06:50.000 --> 0:06:53.839 to see that increase in spending on housing, on healthcare. 0:06:54.160 --> 0:06:57.480 But when we look more closely at goods in particular, 0:06:57.520 --> 0:07:00.800 when we look at things like autos, look at things 0:07:00.920 --> 0:07:04.440 like appliances and other home durables, things that are more 0:07:04.480 --> 0:07:07.640 interest sensitive, consumers are getting a bit more selective. They're 0:07:07.680 --> 0:07:12.200 also searching for bargains online as opposed to shopping more 0:07:12.200 --> 0:07:16.360 frivolously just walking down Rodeo Drive. So we are again 0:07:16.480 --> 0:07:21.520 seeing spending rising, but spending more so on necessities than 0:07:21.600 --> 0:07:23.160 on discretionary categories. 0:07:23.440 --> 0:07:26.520 All right, Well, the August PCE the Price Index out 0:07:26.520 --> 0:07:30.240 this Friday are thanks to Stuart Paull of Bloomberg Economics. 0:07:30.520 --> 0:07:33.679 While we turn now from inflation data to housing data. 0:07:33.680 --> 0:07:36.040 With the interest rate cut from the Fed this past week, 0:07:36.480 --> 0:07:39.640 will the uneven housing market get a boost through lower 0:07:39.680 --> 0:07:42.880 lending rates, which have already been trending lower or are 0:07:43.000 --> 0:07:45.280 rising home prices and a dearth of homes on the market, 0:07:45.520 --> 0:07:48.640 squeezing too many would be buyers out of the marketplace. 0:07:49.000 --> 0:07:52.200 For more, we're joined by Bloomberg Intelligence home builder analyst 0:07:52.640 --> 0:07:55.880 Drew Reading. Now Drew Banks lenders they've been lowering the 0:07:55.960 --> 0:07:57.800 rates for weeks. They're now at a two year low 0:07:57.840 --> 0:08:00.720 averaging six point one five percent. But with this move 0:08:00.760 --> 0:08:02.880 from the Fed last week, are they now poised to 0:08:02.960 --> 0:08:05.920 edge even lower? And how long will it take before 0:08:05.960 --> 0:08:08.440 we see those pre pandemic rates of three and a 0:08:08.480 --> 0:08:09.720 half percent or so. 0:08:09.720 --> 0:08:12.800 So, as you mentioned, mortgage rates have already been moving down. 0:08:12.880 --> 0:08:15.480 They've really been coming down since late April when they 0:08:16.040 --> 0:08:18.000 kind of peaked this year at seven and a half percent, 0:08:18.040 --> 0:08:20.960 and then there's another move lower in July. So the 0:08:21.000 --> 0:08:23.800 tenure yield and mortgage rates kind of anticipated what was 0:08:23.840 --> 0:08:25.920 going to happen with the Fed. So I wouldn't expect 0:08:26.040 --> 0:08:28.200 a whole lot more movement on the rate front in 0:08:28.280 --> 0:08:30.640 the near term. In terms of when we think that's 0:08:30.680 --> 0:08:32.680 going to start to impact the market, I think we 0:08:32.720 --> 0:08:35.720 already have. You know, there hasn't been a massive shift 0:08:35.760 --> 0:08:38.040 in demand to this point, but we have seen a 0:08:38.120 --> 0:08:40.480 market that continues the trend in the right direction, and 0:08:40.480 --> 0:08:45.000 we saw a pickup in mortgage purchase applications. We saw 0:08:45.040 --> 0:08:47.720 a little bit better data on housing starts, so I 0:08:47.720 --> 0:08:51.640 think we are starting to see the benefit from those 0:08:51.720 --> 0:08:52.319 lower rates. 0:08:52.480 --> 0:08:55.640 Yeah, those green shoots. What is behind that jump though, 0:08:55.640 --> 0:08:58.319 when housing starts, I mean that was a pretty significant 0:08:58.400 --> 0:09:00.880 leap from August. 0:09:00.120 --> 0:09:01.640 Of it had to do with the bounce back from 0:09:01.720 --> 0:09:04.319 weather in the prior month, so that's certainly part of it. 0:09:04.640 --> 0:09:07.320 The other thing to remember is that builders have really 0:09:07.360 --> 0:09:10.160 been trying to align their production so starts, with what 0:09:10.200 --> 0:09:12.959 they're seeing in the demand environment. So as demand has 0:09:12.960 --> 0:09:15.400 started to pick up after kind of a lull in 0:09:15.440 --> 0:09:18.520 the summer, I think you're starting to see the corresponding 0:09:18.600 --> 0:09:20.000 increase in housing activity. 0:09:20.760 --> 0:09:24.720 Now. Builder confidence had also been moving higher. They must 0:09:24.760 --> 0:09:27.640 be through the roof right now after this rate cut, 0:09:27.760 --> 0:09:31.880 and you know, all these these indications that things are 0:09:31.920 --> 0:09:32.439 picking up. 0:09:32.760 --> 0:09:35.600 Yeah, I mean, expectations pretty much across the board or 0:09:35.600 --> 0:09:37.920 that in the next several months we should see demand 0:09:38.320 --> 0:09:42.080 perk up even further. What's interesting for the builders, as 0:09:42.080 --> 0:09:44.679 we've discussed in the past, is they've had a lot 0:09:44.720 --> 0:09:47.280 of success even when the market was slow by buying 0:09:47.320 --> 0:09:50.440 down mortgage rates. So they've been doing pretty well over 0:09:50.440 --> 0:09:52.920 the last several months, and we think that with rates 0:09:52.920 --> 0:09:55.239 starting to come back down, they may have an opportunity 0:09:55.600 --> 0:09:58.000 to kind of dial back their use of sales incentives, 0:09:58.040 --> 0:10:00.640 which if you think bigger pictures for the public come builders, 0:10:00.640 --> 0:10:02.480 that could be a benefit to the margin side. 0:10:02.679 --> 0:10:05.200 Now in the week ahead, there's a lot more housing 0:10:05.280 --> 0:10:08.400 data coming out new home sales, pending home sales for August, 0:10:08.679 --> 0:10:11.840 also home prices for July. Are you expecting to see 0:10:11.880 --> 0:10:14.439 any more positive trends in all that data? 0:10:14.559 --> 0:10:16.400 Yeah. With the new home sales, I expect to see 0:10:16.400 --> 0:10:18.440 a market that continues to trend in the right direction. 0:10:18.480 --> 0:10:22.600 As they said earlier, we got some purchase applications specific 0:10:22.720 --> 0:10:26.080 to the new home market not too long ago, and 0:10:26.080 --> 0:10:28.880 what that showed us is that demand in August was 0:10:28.920 --> 0:10:31.680 actually the strongest for this time of the year since 0:10:31.800 --> 0:10:35.000 twenty twenty, So that's a real positive indication for the market. 0:10:35.559 --> 0:10:37.840 We had some data on existing home sales which was 0:10:37.880 --> 0:10:39.680 a little soft, but what you have to remember is 0:10:39.720 --> 0:10:43.200 that represents closings, so that likely reflects deals that were 0:10:43.200 --> 0:10:45.800 signed in June and July when rates were still in 0:10:45.840 --> 0:10:47.079 that seven percent range. 0:10:47.120 --> 0:10:49.880 Now that existing home sales that was last Thursday are 0:10:50.120 --> 0:10:53.120 is it still a problem that people are not putting 0:10:53.160 --> 0:10:56.079 the houses up for sale, you know, because of the 0:10:56.559 --> 0:10:59.360 rates are down. Six point five percent is great, but 0:10:59.440 --> 0:11:03.120 it's still double if you had your mortgage ten years ago, 0:11:03.320 --> 0:11:06.760 you know. I mean, are people still you know, not 0:11:06.880 --> 0:11:08.840 putting their homes up for sale afraid to buy a 0:11:08.840 --> 0:11:10.640 new one at those high rates. 0:11:11.120 --> 0:11:13.680 Yeah, it's a great question, and there's a lot of 0:11:13.679 --> 0:11:16.320 disincentive for kurrent homeowner who doesn't need to move to 0:11:16.320 --> 0:11:18.400 put their house on the market and taking a higher rate. 0:11:18.880 --> 0:11:22.479 If you look at kind of the composition of outstanding mortgages, 0:11:22.880 --> 0:11:25.360 more than eighty percent have a rate below five percent 0:11:25.400 --> 0:11:28.480 and sixty five percent or below four percent. So I 0:11:28.480 --> 0:11:32.480 think that that lock and rate, you know, is still 0:11:32.480 --> 0:11:34.640 a factor. I think it will start start to loosen 0:11:34.760 --> 0:11:36.559 up as we get through the year and into next 0:11:36.640 --> 0:11:39.280 year because people have been transacting at these higher rates. 0:11:40.559 --> 0:11:43.200 So it's definitely a concern, but I do think that 0:11:43.400 --> 0:11:45.800 it starts to ease a little bit as we get 0:11:45.800 --> 0:11:46.520 into next year. 0:11:47.400 --> 0:11:50.120 Now, speaking of next year, you've reported that home sales 0:11:50.280 --> 0:11:55.160 typically move higher after a presidential election. Why is that 0:11:55.280 --> 0:11:57.760 and are you expecting to see that no matter who 0:11:57.760 --> 0:11:59.199 wins the White House in November? 0:11:59.720 --> 0:12:02.800 Yes, So when we looked at what happens typically in 0:12:02.880 --> 0:12:06.319 an election year, you know, there's not a whole heck 0:12:06.360 --> 0:12:08.200 of a lot of impact on home sales. I know, 0:12:08.559 --> 0:12:11.160 you know, there could be an impact on confidence, maybe 0:12:11.160 --> 0:12:12.880 that impact that kind of the lull we saw in 0:12:12.920 --> 0:12:15.720 the summer, But really the point was to show that 0:12:15.840 --> 0:12:20.040 regardless of what party ends up winning, home sales have 0:12:20.160 --> 0:12:22.280 had success in the following year. And I think, you know, 0:12:22.320 --> 0:12:24.599 there's other factors at play, certainly what's happening with the 0:12:24.600 --> 0:12:27.080 broader economy and what's happening with rates. And I think, 0:12:27.559 --> 0:12:29.760 you know, if we do kind of get this soft 0:12:29.840 --> 0:12:32.959 landing that we're talking about and rates, you know, remain 0:12:33.000 --> 0:12:35.600 in the low six percent range, even fall into the 0:12:35.600 --> 0:12:37.760 five percent range, I think home sales should do pretty 0:12:37.800 --> 0:12:38.440 well next year. 0:12:38.720 --> 0:12:41.520 Well, a lot to look forward to, Bloomberg Intelligence home 0:12:41.559 --> 0:12:44.880 builder analyst Drew Redding, thanks for joining us and coming 0:12:44.920 --> 0:12:47.040 up on Bloomberg Day Break weekend, we look ahead to 0:12:47.080 --> 0:12:51.400 one of the most pivotable periods on the UK's political calendar. 0:12:51.679 --> 0:13:05.160 I'm Tom Busby and This is Bloomberg. This is Bloomberg 0:13:05.200 --> 0:13:07.720 Daybreak weekend, our global look ahead at the top stories 0:13:07.720 --> 0:13:10.560 for investors in the coming week. I'm Tom Busby in 0:13:10.600 --> 0:13:12.800 New York. Up later in our program we head to 0:13:12.800 --> 0:13:16.320 Asia and preview the race to become Japan's next Prime minister. 0:13:16.440 --> 0:13:19.280 But first in the coming days, the UK's most powerful 0:13:19.280 --> 0:13:23.480 politicians will vacate the Palace of Westminster for their party 0:13:23.520 --> 0:13:26.120 conferences all around the country. It's a pivotal time for 0:13:26.160 --> 0:13:29.400 the ruling Labor Party as it prepares for its first budget, 0:13:29.800 --> 0:13:32.520 and as the Conservative Party licks its wounds and crowns 0:13:32.559 --> 0:13:33.160 a new leader. 0:13:33.240 --> 0:13:33.640 For more. 0:13:33.760 --> 0:13:36.079 Let's go to London and bring in Bloomberg Daybreak europe 0:13:36.080 --> 0:13:38.160 Banker Caroline Hepker Tom. 0:13:38.280 --> 0:13:42.680 After the summer's general election and landslide Labor victory, UK 0:13:42.800 --> 0:13:46.160 politics is settling into its back to school rhythm, with 0:13:46.320 --> 0:13:48.800 a new party and a new prime minister at the helm. 0:13:49.280 --> 0:13:53.240 A staple of the autumnal political calendar is, of course, 0:13:53.360 --> 0:13:57.400 party conference season, where members gather to regroup and reflect 0:13:57.480 --> 0:14:01.559 on the year ahead. Traditionally the health in historic seaside 0:14:01.600 --> 0:14:06.000 resorts like Blackpool and Brighton, the gatherings can often give 0:14:06.120 --> 0:14:09.520 rise to a gender, setting events and turn young talent 0:14:09.640 --> 0:14:13.320 into rising stars. This year conference season falls at a 0:14:13.360 --> 0:14:16.880 critical time for the two biggest parties in Parliament. Dust 0:14:16.920 --> 0:14:21.080 is settling on the Labour Party's emphatic July election victory, 0:14:21.360 --> 0:14:26.720 as jubilation turns to expectation and the economic reality facing 0:14:26.760 --> 0:14:30.920 the government. On economic decisions, Kirs Starmer has already faced 0:14:31.040 --> 0:14:35.400 fervent opposition to what his party has called difficult decisions 0:14:35.640 --> 0:14:39.440 to means test the winter fuel allowance that is granted 0:14:39.800 --> 0:14:43.920 to pensioners, and also to maintain the cap on benefits 0:14:43.960 --> 0:14:48.120 for families to a maximum of two children. The first 0:14:48.160 --> 0:14:52.720 test four Starmer's administration will come in the government's inaugural 0:14:52.800 --> 0:14:56.600 budget on the thirtieth of October, but first he must 0:14:56.640 --> 0:15:00.680 convince his party that he has a plan. Meanwhile, the 0:15:00.720 --> 0:15:04.960 Conservatives will face a different question altogether at their gathering 0:15:05.040 --> 0:15:08.720 in Birmingham, the future direction of the party, as Tory 0:15:08.840 --> 0:15:12.600 members consider who to anoint their next leader. For the 0:15:12.640 --> 0:15:16.320 Liberal Democrats, who have already concluded their conference in Bournemouth, 0:15:16.360 --> 0:15:19.720 the issue has been where now after the party secured 0:15:19.720 --> 0:15:23.400 and historic seventy two seats in the vote in July. 0:15:23.840 --> 0:15:26.400 It's something that I have been discussing on the Bloomberg 0:15:26.520 --> 0:15:30.840 UK Partics podcast with the former lib Dem leader, so 0:15:31.000 --> 0:15:31.760 Vince Cable. 0:15:32.280 --> 0:15:36.400 First priority will be to consolidate the base that's already 0:15:36.440 --> 0:15:40.560 built up. And you know these are relatively high income 0:15:40.640 --> 0:15:44.800 South of England, suburban rural. I mean, it's a very 0:15:44.840 --> 0:15:50.040 clear constituency, it's not undifferentiated, but that this is not, 0:15:50.080 --> 0:15:54.360 as it were, not natural center left territory. But what 0:15:54.440 --> 0:15:58.239 Libdems are very good at is digging in doing extremely 0:15:58.280 --> 0:16:02.200 good local camper in constituency work. And I would think 0:16:02.280 --> 0:16:06.720 that unless there's some terrible misfortune, that they should be 0:16:06.720 --> 0:16:10.360 able to hold on to the overwhelming bulk of these 0:16:10.440 --> 0:16:14.760 by the next election. But the libdems fortunes in large part, 0:16:14.840 --> 0:16:17.200 I think depend on what happens to the other the 0:16:17.280 --> 0:16:21.280 two major parties. I mean, the Conservative Party, if they 0:16:21.520 --> 0:16:24.240 make a bad choice of leaders, if they continue to 0:16:24.320 --> 0:16:27.240 behave the way they have in recent years, is going 0:16:27.280 --> 0:16:30.720 to continue to flounder. They lose support to us in 0:16:30.800 --> 0:16:34.160 their heartlands, and they could make no progress on the 0:16:34.200 --> 0:16:39.320 other front because reform is gobbling up the populist nationalist vote, 0:16:40.320 --> 0:16:42.920 and that the Tory Party could find itself in a 0:16:43.000 --> 0:16:46.320 kind of existential crisis. I mean, we don't know, but 0:16:46.400 --> 0:16:50.440 that could well happen. Then in terms of labor. They 0:16:50.480 --> 0:16:53.280 are clearly already losing support, and they're going to lose 0:16:53.320 --> 0:16:57.040 support in the four hundred plus seats that they won 0:16:57.120 --> 0:17:00.200 at the last election. But the question then is where 0:17:00.240 --> 0:17:02.760 will it go? I mean, will it go to reform 0:17:02.880 --> 0:17:06.680 if they get better organized. Nigel Farage is a good 0:17:06.760 --> 0:17:12.000 TV personality but clearly not an organizational junius. Or could 0:17:12.000 --> 0:17:16.480 it go to the dissident left, the reborn Corby Knights 0:17:16.720 --> 0:17:17.880 or the Green Party. 0:17:18.000 --> 0:17:20.640 Okay, okay, but hang on a second. Let's cut through 0:17:20.640 --> 0:17:22.800 this a little bit and say is there appetite in 0:17:22.800 --> 0:17:26.320 the Liberal Democrats for leadership? Because there was a glimmer 0:17:26.320 --> 0:17:28.520 of it in the election campaign? Is there now? 0:17:29.080 --> 0:17:29.280 Oh? 0:17:29.320 --> 0:17:32.639 I think so. I mean, I think the mantra which 0:17:32.720 --> 0:17:37.680 is a good mantra. It's a constructive opposition. I don't 0:17:37.720 --> 0:17:41.600 think we just want to go around you cashing in 0:17:41.640 --> 0:17:45.320 on every drift in the public mood. I want to 0:17:45.320 --> 0:17:47.879 play a show that we can be a force in 0:17:48.000 --> 0:17:52.920 Parliament and building on the base that we've already got. 0:17:53.520 --> 0:17:57.080 That was the former Liberal Democrat leader and former Business 0:17:57.119 --> 0:18:00.359 Secretary Vince Cable speaking to me ant Ewan on the 0:18:00.359 --> 0:18:04.760 Bloomberg UK Politics podcast. So what is in store for 0:18:04.920 --> 0:18:08.560 the UK's most powerful politicians then when they gather in 0:18:08.600 --> 0:18:12.680 the coming days, I've been asking Bloomberg's associate editor Alva Ray. 0:18:13.000 --> 0:18:16.919 We started by discussing where Keir Starmer is heading into 0:18:17.040 --> 0:18:18.119 his party's event. 0:18:18.680 --> 0:18:22.639 He's having, i'd say, at a rocky time at the moment, 0:18:23.640 --> 0:18:27.840 his party is being slightly rocked by allegations of cronyism, 0:18:28.080 --> 0:18:31.480 a lot of scrutiny of gifts and freebies that the 0:18:31.520 --> 0:18:35.680 Prime Minister has received, and scrutiny of a wonder owner 0:18:35.760 --> 0:18:40.080 in particular Wahidali, who we have profiled on Bloomberg and 0:18:42.280 --> 0:18:46.040 revealed some things about in stories in the past few weeks. 0:18:46.119 --> 0:18:48.960 But there's sort of other challenges for Keir Starmer that 0:18:49.760 --> 0:18:52.560 there's a lot of tension among his top advisors and 0:18:52.680 --> 0:18:57.440 so his chief of staff, Sue Gray, has been named 0:18:57.480 --> 0:19:00.120 in a BBC story. The story itself is less import 0:19:00.320 --> 0:19:03.040 than the fact that she has been targeted by colleagues 0:19:03.080 --> 0:19:07.240 for quite a an aggressive briefing. So he's dealing with 0:19:07.320 --> 0:19:11.840 quite a lot of discontent and sort of difficult stories 0:19:12.240 --> 0:19:14.000 so soon into his premiership. 0:19:14.000 --> 0:19:17.280 I mean he only won the election in July. 0:19:18.200 --> 0:19:21.920 But then also they're quite quite substantial fiscal difficulties, so 0:19:21.960 --> 0:19:23.200 I'm sure we'll come on to talk about. 0:19:24.160 --> 0:19:27.920 Yeah, and this idea of factionalism, of divisions within the 0:19:27.960 --> 0:19:31.960 labor parties. You say, very recently elected, do you think 0:19:31.960 --> 0:19:34.359 that that will mean there'll be a big focus on 0:19:34.480 --> 0:19:37.719 party unity? I mean also there has already been in 0:19:37.760 --> 0:19:42.080 the actual parliamentary session. There's been rebellion already over policy. 0:19:42.200 --> 0:19:44.600 So do you think there'll be a sort of focus 0:19:44.760 --> 0:19:49.000 on trying to I mean, a surely celebrate the recent 0:19:49.119 --> 0:19:52.439 victory at the party conference, but then also try to 0:19:52.640 --> 0:19:53.760 unify the party. 0:19:53.920 --> 0:19:57.679 It's not so much factionalism in the way that we 0:19:57.720 --> 0:20:02.160 would have seen under perhaps Ermie Corbyn's leadership. It's more 0:20:02.240 --> 0:20:05.439 sort of just tension, tensions on an individual level between 0:20:05.880 --> 0:20:06.879 individual people. 0:20:07.200 --> 0:20:09.440 But as you say, there has been. 0:20:10.119 --> 0:20:13.719 A bit of tension already, and there's been a rebellion 0:20:14.320 --> 0:20:17.639 over this issue of the Winter Fuel Alliance, which is 0:20:17.640 --> 0:20:19.800 a sort of benefit given to pensioners to pay for 0:20:19.840 --> 0:20:23.280 their heating bills in the winter. Rachel reeves the incoming 0:20:23.359 --> 0:20:28.680 chancellor has decided to means test that she announced that 0:20:29.080 --> 0:20:32.919 before the summer and was clearly not expecting the backlash 0:20:33.080 --> 0:20:37.639 that she received. So even though they have passed that 0:20:37.840 --> 0:20:40.320 now and that will that will go ahead. 0:20:40.480 --> 0:20:42.480 Lots of labor MPs abstained. 0:20:42.680 --> 0:20:46.840 Some cabinet ministers anonymously told news outlets that they were 0:20:47.200 --> 0:20:50.720 nervous about the decision. And essentially this decision has has 0:20:50.760 --> 0:20:55.520 expended a lot of political capital very early on, and 0:20:55.600 --> 0:20:58.960 it makes all the all the decisions that are coming 0:20:59.080 --> 0:21:02.280 quite difficult. Because Rachel Riefs still has to deliver a 0:21:02.400 --> 0:21:05.240 very difficult budget. She's been speaking about twenty two billion 0:21:05.280 --> 0:21:09.240 black hole in the public finances. She's asking cabinet ministers 0:21:09.280 --> 0:21:11.919 to look for cuts in their departments. We'll see a 0:21:11.920 --> 0:21:16.080 lot of conference probably of individual cabinet ministers hinting that 0:21:16.119 --> 0:21:19.200 they want more money for ailing public services, for prisons, 0:21:19.200 --> 0:21:22.640 for the health service, for transport. I think there will 0:21:22.680 --> 0:21:28.800 be a lot of tension and kind of bartering for goodies. 0:21:28.119 --> 0:21:28.760 In the budget. 0:21:29.320 --> 0:21:31.879 But I think because it is so early on, the 0:21:32.520 --> 0:21:37.919 party is still feeling united behind Keir Starmer and Rachel Reeves, 0:21:37.920 --> 0:21:39.640 even though I think they feel like they've been put 0:21:39.680 --> 0:21:41.640 through the ring aer a bit in recent weeks. 0:21:42.240 --> 0:21:47.680 Yeah, absolutely, and I suppose that the money and that, 0:21:47.840 --> 0:21:51.159 as you say, the winter fuel allowance issue, which is 0:21:51.240 --> 0:21:55.800 money given to pension or was You know that contrast 0:21:56.280 --> 0:21:59.720 with the story around Kars Darmer's advisors to great and 0:21:59.760 --> 0:22:02.080 her salary that has been kind of one of the 0:22:02.119 --> 0:22:04.919 threads in recent days, hasn't it, So you know how 0:22:05.000 --> 0:22:07.240 much people are being paid, and that kind of contrast 0:22:07.240 --> 0:22:09.720 has been something that's been focused on a lot. Look, 0:22:09.840 --> 0:22:13.679 I also want to talk a bit about business. What 0:22:13.800 --> 0:22:16.720 business will be looking to hear from the Labor Party 0:22:16.720 --> 0:22:18.760 conference because of of course, we spent a lot of 0:22:18.800 --> 0:22:23.280 time reporting about what Labor was saying to businesses and 0:22:23.359 --> 0:22:26.119 investors here in the UK before they came into power. 0:22:26.119 --> 0:22:28.639 There'll be the budget after the party conference, So what 0:22:28.720 --> 0:22:31.280 do you think we will hear from Labor at conference? 0:22:31.359 --> 0:22:32.359 On business? 0:22:33.040 --> 0:22:36.440 I think this will be really interesting because it actually 0:22:36.520 --> 0:22:39.280 goes to the heart of some of the big questions 0:22:39.359 --> 0:22:41.760 that Rachel Reeves is grappling with right now as she 0:22:42.040 --> 0:22:45.520 finalizes her budget, which is happening in October. 0:22:45.880 --> 0:22:47.800 I think that we've. 0:22:47.440 --> 0:22:51.600 Already seen mattering from the business community that they have 0:22:51.720 --> 0:22:55.639 been finding her rhetoric around this twenty two billion black 0:22:55.640 --> 0:23:00.240 hole to be not terribly inspiring of confidence. And there's 0:23:00.240 --> 0:23:04.000 a bit of a tension between all this emphasis on 0:23:04.040 --> 0:23:07.560 the need for cuts and fiscal prudence and the difficult inheritance, 0:23:07.920 --> 0:23:10.119 and then on the other hand, the fact that this 0:23:10.200 --> 0:23:14.040 is the same Labor Party has spoken about the need 0:23:14.080 --> 0:23:17.760 to go for growth and to invest and Rachel Reeves 0:23:17.800 --> 0:23:20.959 describing the value of capital investment. So I think that 0:23:21.000 --> 0:23:23.199 a lot of people from the business community, particularly on 0:23:23.240 --> 0:23:26.960 the Monday of conference next Monday, which is Business Day, 0:23:27.480 --> 0:23:31.720 I think that business figures will be looking for a 0:23:31.760 --> 0:23:36.680 bit of clarity from Rachel Reeves on whether that capital 0:23:36.720 --> 0:23:41.440 investment is coming. There are all these new vehicles established 0:23:41.480 --> 0:23:44.000 by the Labor Party that they're still getting set up, 0:23:44.119 --> 0:23:48.680 like gb Energy, a state owned energy company, the National 0:23:48.720 --> 0:23:53.880 Wealth Fund, various sort of vehicles to leverage private investment. 0:23:53.920 --> 0:23:55.680 So the state will put in a bit and then 0:23:55.680 --> 0:23:58.080 they're hoping that the private sector will come in. But 0:23:58.200 --> 0:24:00.520 I think that business is feeling that my they're getting 0:24:00.560 --> 0:24:03.199 mixed messages at the moment, as I think probably the 0:24:03.240 --> 0:24:07.200 whole of the Labor Party and the political community feels 0:24:07.200 --> 0:24:09.760 as well. So I think that's kind of the key 0:24:09.840 --> 0:24:13.080 thing that she's grappling with, whether they'll get answers and 0:24:13.119 --> 0:24:16.119 whether she's decided which one she's prioritizing, I think is 0:24:16.119 --> 0:24:16.760 a different matter. 0:24:17.880 --> 0:24:22.400 Yeah, absolutely. I mean, for example, you've got the Resolution Foundation, 0:24:22.600 --> 0:24:25.840 you know, wanting to know more about economic growth and 0:24:25.880 --> 0:24:30.240 the plans of the government from the Labor Party. Just briefly, 0:24:30.560 --> 0:24:33.400 a question on the Conservative leadership race though, because they 0:24:33.400 --> 0:24:36.520 will also be holding their party conference, how will the 0:24:36.560 --> 0:24:39.479 different candidates be approaching conference. What do you think confidence 0:24:39.560 --> 0:24:41.360 is going to be like this year for the Tories, 0:24:41.359 --> 0:24:46.199 of course, after an absolutely terrible general election result. 0:24:47.000 --> 0:24:50.040 Well, I think that so you would expect them to 0:24:50.119 --> 0:24:53.920 be licking their wounds and for conferences to be a 0:24:54.040 --> 0:24:58.920 quite brutal crash landing because, as you can imagine, Caroline, 0:24:59.359 --> 0:25:04.080 the sort of business and money goes where power is. 0:25:04.359 --> 0:25:07.879 So the Conservatives have been quite used to having lots 0:25:07.880 --> 0:25:13.120 of business representation sponsored events, like a lot of money 0:25:13.320 --> 0:25:16.359 at their conferences for the past fourteen years, and I 0:25:16.359 --> 0:25:19.320 think they will discover this year that that has dried up. 0:25:19.400 --> 0:25:22.040 I think we've already seen reports that they were. 0:25:21.880 --> 0:25:26.320 Struggling to attract sufficient sponsorship or enough attendees for their 0:25:26.359 --> 0:25:30.280 business events, so I think it will feel very different 0:25:30.680 --> 0:25:34.280 just because it's our first conference in opposition. 0:25:34.760 --> 0:25:37.919 That was Boomberg's associate editor al Va ray My thanks 0:25:37.960 --> 0:25:38.240 to her. 0:25:38.320 --> 0:25:38.560 Well. 0:25:38.600 --> 0:25:41.560 Party conference season is always a good moment to understand 0:25:41.600 --> 0:25:45.480 more about the policies to come. I'm Caroline Hepkee here 0:25:45.520 --> 0:25:48.000 in London and you can catch us every weekday morning 0:25:48.040 --> 0:25:50.880 for Bloomberg Daybreak you at beginning at six am in London. 0:25:51.200 --> 0:25:52.840 That's one am on Wall Street. 0:25:52.960 --> 0:25:56.000 Tom, Thanks Caroline, and coming up on Bloomberg day Break weekend, 0:25:56.080 --> 0:25:58.159 we take a look at the wide open race to 0:25:58.200 --> 0:26:01.320 become the next Prime Minister of Japan. I'm Tom Busby, 0:26:01.400 --> 0:26:14.280 and this is Bloomberg. I'm Tom Busby in New York 0:26:14.280 --> 0:26:16.199 with your global look ahead at the top stories for 0:26:16.240 --> 0:26:18.960 investors in the coming week. We're just a week away 0:26:19.000 --> 0:26:23.280 from the election for leadership of Japan's ruling Liberal Democratic Party. 0:26:23.400 --> 0:26:26.639 Let's turn to Bloomberg Daybreak Asia hosts Brian Curtis and 0:26:26.720 --> 0:26:27.920 Doug Krisner for more. 0:26:28.080 --> 0:26:30.560 A record nine candidates are in the race to lead 0:26:30.600 --> 0:26:34.200 the LDP. The election on September twenty seventh is all 0:26:34.240 --> 0:26:37.320 but as sure to dictate Japan's next Prime minister. Because 0:26:37.320 --> 0:26:39.080 of the party's dominance in parliament. 0:26:39.640 --> 0:26:42.800 Whoever is chosen will take over for Fumio Keishia, the 0:26:42.800 --> 0:26:46.199 current Prime minister. Back in August, Kishita made a surprise 0:26:46.240 --> 0:26:48.359 announcement that he would not run in the election. 0:26:48.640 --> 0:26:52.800 Earlier, Brian and I spoke with Gerode Reedy, Bloomberg opinion columnist. 0:26:53.119 --> 0:26:56.080 The question is about the stakes for the future of 0:26:56.119 --> 0:26:57.080 the party right now. 0:26:57.840 --> 0:27:02.440 It's really important that they choose someone who's going to 0:27:02.520 --> 0:27:05.880 restore public trust in the party. You know, the parties 0:27:06.440 --> 0:27:12.119 standing you know with Japanese people is probably close to 0:27:12.640 --> 0:27:15.600 an all time low right now. There's been a series 0:27:15.640 --> 0:27:20.520 of scandals, most recently a funding scandal involving unreported political 0:27:20.600 --> 0:27:25.920 donations that has really damaged the party standing with the public. 0:27:26.240 --> 0:27:28.439 At the same time as this election is going on 0:27:28.520 --> 0:27:31.680 for the leader of the LDP, there's also another election. 0:27:31.920 --> 0:27:35.320 It's less talked about and less reported, but the opposition 0:27:35.440 --> 0:27:39.879 is also choosing a new leader and that is going 0:27:39.960 --> 0:27:42.359 to maybe give a bit of win to their sales. 0:27:42.400 --> 0:27:45.600 There needs to be an election held within basically within 0:27:45.680 --> 0:27:50.720 the next year, and the LDP is pretty vulnerable right now, 0:27:50.760 --> 0:27:54.879 so it is important that they give themselves a bit 0:27:54.920 --> 0:27:59.120 of a facelift and you know, go to the Japanese 0:27:59.200 --> 0:28:02.639 people and show that they that they have changed. 0:28:03.200 --> 0:28:08.440 And speaking of a facelift, the economy minister Sanai's Takaichi 0:28:09.000 --> 0:28:10.920 has emerged as one of the front runners. It would 0:28:10.960 --> 0:28:14.160 be very interesting to see a woman prime minister in Japan. 0:28:14.840 --> 0:28:16.439 Is she kind of rising in the polls? 0:28:16.480 --> 0:28:20.439 Now, that's right. Yet in the last week there there 0:28:20.760 --> 0:28:22.600 was nine candidates at the start of this and the 0:28:22.680 --> 0:28:25.040 nine candidates they're all still in it. But there's definitely 0:28:25.080 --> 0:28:27.480 three people who have pulled away as a sort of 0:28:28.240 --> 0:28:32.760 leading pack, with Shindio Koizumi, Shigheiro Lishiba and as you say, 0:28:32.760 --> 0:28:37.800 Sanai Takaichi. She is definitely I think surprising people with 0:28:37.960 --> 0:28:41.640 her being in that pack and her performance. She would 0:28:41.680 --> 0:28:46.200 be the first female prime minister in Japan. She is 0:28:46.240 --> 0:28:51.280 also probably the most conservative person within those nine people, 0:28:51.360 --> 0:28:54.920 and indeed one of the most high profile conservative politicians 0:28:55.360 --> 0:28:57.440 in the country. It is a little bit of a 0:28:57.800 --> 0:29:00.920 surprise to see her doing so well. I don't know 0:29:00.960 --> 0:29:04.000 if everyone expected her to be doing so well at 0:29:04.040 --> 0:29:06.600 the start of this race. I think we've seen you know, 0:29:07.080 --> 0:29:09.680 cooison me had his moment in the sun, he's dipping 0:29:09.720 --> 0:29:12.400 a little bit in public opinion polls at the moment. 0:29:13.320 --> 0:29:15.880 Takaichi seems to be has a bit of wind in 0:29:15.920 --> 0:29:18.680 her sales at the moment and is now as a result, 0:29:18.800 --> 0:29:21.680 she is getting attacked a little bit more by the 0:29:21.720 --> 0:29:24.640 other candidates, which you know could damage her as well. 0:29:24.880 --> 0:29:26.440 So still a little bit of a way to go. 0:29:26.760 --> 0:29:29.200 Koison me is forty three years old. I think he's 0:29:29.200 --> 0:29:31.960 the youngest candidate, and he's promised to change what he's 0:29:32.000 --> 0:29:35.200 described as an old fashioned LDP. Do you think there's 0:29:35.320 --> 0:29:36.600 any runway for him here? 0:29:36.680 --> 0:29:38.640 Absolutely there is. I mean, I would still say that 0:29:38.720 --> 0:29:42.480 he is probably the front runner, even though I think 0:29:42.520 --> 0:29:44.840 he has been attacked. I guess because he is the 0:29:44.840 --> 0:29:48.720 front runner, and also maybe some of the talking points 0:29:48.760 --> 0:29:51.560 he brought up, including sort of reform of the labor 0:29:51.600 --> 0:29:54.520 market and making it easier for companies to fire people, 0:29:54.920 --> 0:29:57.520 has put a bit of a target on his back. 0:29:57.760 --> 0:30:02.040 There absolutely is room, however, for him to win this race, 0:30:02.120 --> 0:30:04.280 as I think getting one of those three right now, 0:30:04.520 --> 0:30:07.400 it's quite hard to say, you know, even even talking 0:30:07.400 --> 0:30:09.480 to the experts in this at this point in time, 0:30:09.480 --> 0:30:12.440 it's very hard to say who's going to you know, 0:30:12.640 --> 0:30:15.000 who has the best chance of winning, because it all 0:30:15.000 --> 0:30:19.760 depends on who makes it into the likely runoff election 0:30:19.880 --> 0:30:23.680 if no one candidate gets a majority of the votes. 0:30:23.840 --> 0:30:27.160 He is Gerod Reedy speaking of to us earlier, and 0:30:27.440 --> 0:30:29.880 he is a Bloomberg opinion columnist. 0:30:29.400 --> 0:30:33.160 And now joining us is Isabelle Reynolds, Bloomberg's Tokyo bureau chief. 0:30:33.240 --> 0:30:37.160 For more discussion. Isabelle, thank you for joining us. Is 0:30:37.200 --> 0:30:41.080 this an election that will be determined by almost entirely 0:30:41.120 --> 0:30:44.760 by domestic issues or will international issues. 0:30:44.360 --> 0:30:44.880 Be at play? 0:30:45.080 --> 0:30:48.200 Definitely, the economy is high on the agenda. People are 0:30:48.280 --> 0:30:51.479 not necessarily happy with how the economy is going. You know, 0:30:52.000 --> 0:30:55.080 Japan has touted how inflation has returned to the economy. 0:30:55.280 --> 0:30:58.400 With the many people in Japan, who has a very 0:30:58.440 --> 0:31:04.160 elderly population, unfixed incomes, inflation is not welcome, so people 0:31:04.240 --> 0:31:07.920 are not necessarily feeling happy about their pocketbooks. On the 0:31:07.960 --> 0:31:11.360 other hand, we did see an und alarming incident in 0:31:11.480 --> 0:31:14.880 China where a young Japanese boy was stabbed and sadly 0:31:14.920 --> 0:31:17.840 found out to have died from his injuries, and that 0:31:18.040 --> 0:31:20.920 kind of thing it could inflame sort of public opinion 0:31:20.960 --> 0:31:24.400 about ties with China, and potentially I don't know this 0:31:24.480 --> 0:31:27.680 for sure, but it could potentially give a bit more 0:31:27.720 --> 0:31:31.560 sort of a boost to someone like Takeichi, who is 0:31:31.560 --> 0:31:35.200 a pretty conservative hardliner and would not be afraid to 0:31:35.280 --> 0:31:37.160 sort of take a tough stance with China. 0:31:37.640 --> 0:31:40.040 So do you think the economy right now in Japan 0:31:40.160 --> 0:31:43.640 is kind of at a turning point? Inflation returning for 0:31:43.680 --> 0:31:47.400 the first time in what about three decades, We've recently 0:31:47.480 --> 0:31:50.280 seen the first interest rate hike from the BOJ in 0:31:50.320 --> 0:31:53.720 about seventeen years. Is this a pivot point that is crucial? 0:31:54.560 --> 0:31:57.760 Yes? I mean this year has seen a huge turning 0:31:57.800 --> 0:32:01.880 point for Japan. After decades of deflation, here comes inflation, 0:32:02.040 --> 0:32:05.000 prices a rising. People are not used to that. Some 0:32:05.040 --> 0:32:08.000 people welcome it with particularly young people in the job 0:32:08.040 --> 0:32:11.760 market are being paid more. They're feeling fine about it perhaps, 0:32:11.800 --> 0:32:14.000 But then if you look at the older, older generation, 0:32:14.120 --> 0:32:16.720 as I say that, it's not so comfortable for them. 0:32:16.760 --> 0:32:19.680 But yes, it's definitely a turning point. The Bank of 0:32:19.760 --> 0:32:22.880 Japan is doing things it hasn't done for decades, and 0:32:22.920 --> 0:32:26.200 that's affecting everybody's lives across the board and the way 0:32:26.240 --> 0:32:27.240 companies are operating. 0:32:28.320 --> 0:32:33.640 You mentioned Sannai Kintakeichi earlier, the Economic Security minister, and 0:32:33.720 --> 0:32:36.440 that she's leaning towards the right and might be a 0:32:36.480 --> 0:32:39.360 candidate that has kind of winn in the sales. It's 0:32:39.400 --> 0:32:42.400 funny because when we talked about a month or so ago, 0:32:43.160 --> 0:32:46.840 we talked about Yoko Kamikawa, the Foreign Minister, that she 0:32:47.320 --> 0:32:50.840 might be someone who could become the first woman prime 0:32:50.840 --> 0:32:53.480 minister in Japan. Let's talk a little bit about that. 0:32:53.880 --> 0:32:55.880 I think she's probably slipped a little in the polls, 0:32:55.920 --> 0:32:59.960 but is it possible that Sanai can win. 0:33:00.120 --> 0:33:02.480 Possible, It's very possible. In some of the polls when 0:33:02.520 --> 0:33:05.160 you look at the figures for the supporters of the 0:33:05.240 --> 0:33:10.520 ruling LDP, Takeji has come out on top, So it 0:33:10.560 --> 0:33:13.840 is certainly possible. She's as good was saying earlier, she's 0:33:13.880 --> 0:33:16.080 one of those three who've pulled away from the rest 0:33:16.080 --> 0:33:19.120 of the pack. So it's highly likely that two of 0:33:19.160 --> 0:33:22.040 those three will be in a runoff and one of them, 0:33:22.120 --> 0:33:24.280 one of the three, will will be the winner. I mean, 0:33:24.280 --> 0:33:26.360 it would be a bit of a surprise for all 0:33:26.400 --> 0:33:28.760 sorts of reasons, one of which being that she was 0:33:28.880 --> 0:33:31.680 very close to Prime Minister former Prime Minister Sans or Abbe, 0:33:31.720 --> 0:33:35.280 who was assassinated a couple of years ago after Marth 0:33:35.320 --> 0:33:37.880 of his assassination was one of these huge scandals that 0:33:37.960 --> 0:33:41.440 hit the LDP for its connections with a fringe religion, 0:33:42.280 --> 0:33:43.959 and so it would be in that sense a bit 0:33:44.000 --> 0:33:46.720 of a surprise for the LDP, who wants to present 0:33:46.760 --> 0:33:49.880 a new phase to come up with someone who is 0:33:50.160 --> 0:33:52.760 so closely associated with former Prime Minister Abbe. 0:33:52.920 --> 0:33:56.440 What about the similarity between Snati's economic plan and what 0:33:56.440 --> 0:33:58.040 we used to call Abinomics. 0:33:58.360 --> 0:34:01.240 Absolutely, I mean she was very much a fan of 0:34:01.280 --> 0:34:04.480 his policies in all sorts of senses, and that includes 0:34:04.840 --> 0:34:08.440 the central bank policy. So she's been in contrast to 0:34:08.480 --> 0:34:11.439 the other candidates in this race who have mostly been 0:34:11.600 --> 0:34:14.399 sort of in line with the government and the current 0:34:14.480 --> 0:34:17.920 Bank of Japan policy, she's been sort of fighting against 0:34:17.920 --> 0:34:21.280 the tide and saying, you know, interest rates hikes shouldn't 0:34:21.280 --> 0:34:25.040 go too far. We still need really easy policy. The 0:34:25.040 --> 0:34:27.960 inflation we do have is sort of imported from abroad. 0:34:28.080 --> 0:34:30.880 It's down to the you know, the wars overseas that 0:34:30.920 --> 0:34:34.400 are bringing it, and it's not that the Japanese economy 0:34:34.480 --> 0:34:36.480 is sort of getting heating up. 0:34:37.400 --> 0:34:40.160 And with her rise, the fact that she's getting support 0:34:40.200 --> 0:34:44.239 from the right wing in the party. Can we extrapolate 0:34:44.239 --> 0:34:46.840 from that and say that in Japanese society that the 0:34:46.880 --> 0:34:50.640 country is turning more nationalists and more to the right. 0:34:51.080 --> 0:34:53.879 No, I don't think that's necessarily the case. I mean, 0:34:53.920 --> 0:34:58.359 she has certain views on women in society which are 0:34:58.400 --> 0:34:59.200 not the mainstream. 0:34:59.280 --> 0:34:59.440 Now. 0:34:59.440 --> 0:35:02.439 For example, there's this whole issue of whether women should 0:35:02.480 --> 0:35:05.279 be allowed to have separate surnames from their husbands, and 0:35:05.320 --> 0:35:08.680 she says no, they should not, whereas most people in 0:35:08.760 --> 0:35:11.200 Japan and most of the other candidates in this race 0:35:11.360 --> 0:35:13.480 say well, yeah, of course men and women should be 0:35:13.520 --> 0:35:16.560 allowed to have separate surnames if they wish. So she 0:35:16.719 --> 0:35:21.400 is more conservative than the general trend. But this is 0:35:21.400 --> 0:35:24.279 all down to dynamics within the ruling LDP, and they 0:35:24.320 --> 0:35:26.839 are not Although they've been in power for so long, 0:35:26.880 --> 0:35:29.400 they are not always exactly in tune with the average 0:35:29.520 --> 0:35:30.279 Japanese voter. 0:35:30.640 --> 0:35:33.759 I was reading that Ishibai is promising to push for 0:35:33.880 --> 0:35:37.680 gender equality and also measures to address not only the 0:35:37.719 --> 0:35:41.120 low birth rate but the declining population as well. What 0:35:41.280 --> 0:35:43.920 is happening right now in Japan demographically? 0:35:44.560 --> 0:35:47.840 Oh well, I mean, Japan, as you know, is the 0:35:47.880 --> 0:35:50.400 oldest country in the world in terms of the number 0:35:50.440 --> 0:35:53.359 of the percentage of people over the age of sixty five. 0:35:54.360 --> 0:35:56.800 Current Prime Minister Kishida has referred to this as a 0:35:56.880 --> 0:35:59.960 national crisis and said we have only a few years 0:36:00.200 --> 0:36:03.319 to really deal with this, or things will get out 0:36:03.320 --> 0:36:06.680 of control and many areas of Japan could be find 0:36:06.680 --> 0:36:10.040 themselves struggling to deal that, you know, provide the basic 0:36:10.120 --> 0:36:13.520 services that people expect. They just simply won't have enough 0:36:13.600 --> 0:36:16.560 young people to look after all the old people. Money's 0:36:16.600 --> 0:36:19.520 being thrown at the problem. There's a lot of support now, 0:36:19.640 --> 0:36:23.400 I think for young families in terms of finance and 0:36:23.840 --> 0:36:26.960 helping them during those early years when it's hard to 0:36:27.280 --> 0:36:29.440 be raising a family and working at the same time. 0:36:30.239 --> 0:36:32.920 But it's very questionable about whether they'll be able to 0:36:33.000 --> 0:36:33.799 turn the tide on this. 0:36:34.480 --> 0:36:37.360 Is there anything in a nationalistic vein? I mean talking 0:36:37.400 --> 0:36:40.480 about Japan's standing or place on the global stage. 0:36:40.560 --> 0:36:44.760 Oh well, that's very much the line that Takeichi, of course, 0:36:44.920 --> 0:36:48.520 would put forward as her basic policy. That's what she wants. 0:36:48.520 --> 0:36:52.040 That's the kind of rhetoric that abbe used to use 0:36:52.120 --> 0:36:55.520 for many years. How far that actually plays with the public, 0:36:55.560 --> 0:36:58.400 I don't really know. I'm not sure that the average 0:36:58.480 --> 0:37:01.080 voter is that key, you know, on this kind of 0:37:01.400 --> 0:37:03.400 issue of whether Japan's playing a huge role on the 0:37:03.440 --> 0:37:07.440 global stage. But on the other hand, this election doesn't 0:37:07.480 --> 0:37:10.400 involve the average voter. It's all members of the LDP, 0:37:10.800 --> 0:37:13.160 and when it comes to the runoff, it's almost exclusively 0:37:13.960 --> 0:37:17.680 LDP lawmakers, so that rhetoric may play better than with 0:37:17.800 --> 0:37:19.960 them that it would with the public at large, who 0:37:20.000 --> 0:37:22.320 are concerned with more kind of bread and butter issues. 0:37:22.560 --> 0:37:24.600 One of the things that Brian and I have noticed 0:37:24.640 --> 0:37:27.480 in covering the Japanese stock market the degree to which 0:37:28.120 --> 0:37:32.080 corporate reform has really made an impact in the performance 0:37:32.120 --> 0:37:34.040 of some of the stocks, let's say, in the Nike 0:37:34.640 --> 0:37:38.440 structural reform. Corporate reform, is that something that will continue 0:37:38.480 --> 0:37:38.719 to be. 0:37:38.680 --> 0:37:41.680 Addressed it very much will I don't think that's something 0:37:42.120 --> 0:37:46.440 really that the various candidates can appeal to the public with, 0:37:46.600 --> 0:37:50.880 But certainly some of the candidates, including Cornell who's famous 0:37:50.880 --> 0:37:54.800 for his love of the idea of reform and Cooison 0:37:54.880 --> 0:37:58.200 me also have been looking into this issue and want 0:37:58.239 --> 0:38:00.839 to make Japan more of a sort of fluid and 0:38:01.280 --> 0:38:06.080 normal in inverted commas economy. Whether they'll be able to 0:38:06.080 --> 0:38:08.920 do that is another question. I mean, they'll come into government, 0:38:08.920 --> 0:38:11.040 but they'll still be dealing with all the same issues 0:38:11.080 --> 0:38:14.080 that obviously everybody has been dealing with for the past 0:38:14.120 --> 0:38:14.880 couple of decades. 0:38:15.080 --> 0:38:17.440 Isabelle, thank you so much for helping us set up 0:38:17.480 --> 0:38:21.760 the election for leadership of the ruling LDP party in Japan. 0:38:21.920 --> 0:38:26.200 Isabelle Reynolds, Bloomberg's Tokyo bureau chief. I'm Doug Prisner along 0:38:26.239 --> 0:38:28.440 with Brian Curtis. You can join us weekdays here for 0:38:28.480 --> 0:38:32.319 Bloomberg Daybreak Asia beginning at eight am in Hong Kong 0:38:32.480 --> 0:38:34.080 eight pm on Wall Street. 0:38:34.360 --> 0:38:37.400 Tom thanks to Bloomberg day Break Asia host Doug Crisner 0:38:37.600 --> 0:38:40.200 and Brian Curtis. And that does it for this edition 0:38:40.200 --> 0:38:43.080 of Bloomberg day Break Weekend. Join us again Monday morning 0:38:43.080 --> 0:38:45.160 at five am Wall Street Time for the latest on 0:38:45.320 --> 0:38:48.040 markets overseas and the news you need to start your day. 0:38:48.560 --> 0:38:51.600 I'm Tom Busby. Stay with us. Top stories and global 0:38:51.600 --> 0:38:54.680 business headlines are coming up right now.